LEGAL
Typically, when a case is decided as moot – that there is no legal controversy for the deciding court to rule on – there isn't much to be gleaned from such precedent outside of legal issues involving the same.
That isn't the case with Already, LLC v. Nike, Inc., decided by the Supreme Court on January 9.
The Already ruling, although dismissing the case for mootness, issued at least two notable warnings to corporations involving trademark legal disputes.
A quick review of the facts is necessary to understand the full meaning and scope of these warnings.
Both Nike and Already, LLC are athletic shoe manufacturers and sellers.
Nike is well-known in the marketplace for its products, and Already is a smaller competitor of Nike's that is more well-known under its business name, YUMS.
The dispute started in 2008 when, according to court filings, Nike discovered that Already had hired two Nike shoe engineers to design shoes for Already.
First, Nike sent a cease and desist letter to Already; the letter claimed that Already's "Soulja Boy Tell Em Signature" design infringed on Nike's Air Force 1 trademarked design, and insisted that Already cease any and all such infringement.
When Already refused, Nike filed this suit, alleging that two variations of Already's Soulja Boy designs violated Nike's Air Force 1 trademark. Already denied the allegations and, via counterclaim, challenged the validity of Nike's Air Force 1 trademark itself.
After a settlement conference, Nike determined that "Already's very limited distribution made it ‘not truly a commercial threat.'"
As such, Nike issued a "Covenant Not to Sue," promising "not to raise any trademark or unfair competition claims against Already or any affiliated entity based on Already's existing footwear designs, or any future Already designs that constituted a "colorable imitation" of Already's current products."
Nike then moved to dismiss both its claims and Already's with prejudice; Already agreed to the dismissal of Nike's claims, but opposed the dismissal of its own claims.
Finding that Nike's Covenant prohibited Nike from asserting trademark infringement claims against Already based on any of its current or planned future designs, the district court dismissed both claims as moot.
The appeals court affirmed, as did the Supreme Court.
However, even though the Court affirmed the dismissal unanimously, the Justices had some additional things to say that weren't about mootness (the aforementioned "warnings").
First, the Court described Nike's Covenant as "unconditional and irrevocable," stressed the broadness of its scope, and reiterated that the promise was judicially enforceable.
The Court made these observations in the context of addressing whether Nike had met its burden of showing that "it is absolutely clear the allegedly wrongful behavior could not reasonably be expected to recur" – in other words, that Nike wasn't going to just sue again for trademark infringement once the current action had ended.
The warning here is that if you are going to make a promise not to sue – especially one made in connection with seeking to end specific litigation – courts are going to strictly hold you to that promise.
The second warning, although voiced by the entire Court, came more prominently from the four Justice concurrence (consisting of Justices Kennedy, Thomas, Alito, and Sotomayor).
That concurrence cautioned the lower courts that promises not to sue, such as Nike's, do not warrant an automatic dismissal of the connected suits; the promise must be as broad and restrictive as Nike's.
This warning, though, seemed to be made in connection with a stronger one directed at trademark holders that may use these covenants as part of a larger strategy to abuse the courts system.
Abuse how?
According to Justice Kennedy's concurrence, "charges of trademark infringement can be disruptive to the good business relations between the manufacturer alleged to have been an infringer and its distributors, retailers, and investors. The mere pendency of litigation can mean that other actors in the marketplace may be reluctant to have future dealings with the alleged infringer."
In short, Kennedy's concurrence cautioned courts to be aware of this litigation tactic – one whose sole purpose is not judicial relief, but the economic disruption of one's competitors.
Although the concurrence consisted of only a minority of Justices, it does serve to put the lower courts on notice of such a tactic, which was probably the concurring Justices' point.
After all, while it's no surprise that courts loathe tactical litigation, it's often surprising how some courts fail to recognize it when they see it.
Jeremy Byellin is a practicing attorney in the state of Minnesota and a writer for the Westlaw Insider blog. His articles for the blog cover a wide range of legal topics, with a specific focus on major legal developments and cyberlaw.
-->
